March 2023 marked a concerning deceleration for India’s mining industry, with the output growth plummeting to a 19-month nadir of 1.2%, a steep decline from the 8% increase witnessed in the preceding month. This downtrend raises red flags regarding the potential slackening of the broader industrial production in the nation, ahead of official data expected on May 10 by the National Statistical Office.
Mining is a significant pillar of India’s Index of Industrial Production (IIP), holding a substantial weight of 14.3%. The month of February saw the industrial output growth surge to a four-month peak of 5.7%, propelled by robust performance in mining and electricity, which recorded growths of 8% and 7.5%, respectively. It is noteworthy that manufacturing, which is the largest component of the IIP, contributing a hefty 77.6%, grew 5% in the same month.
Economists are keeping a watchful eye on the growth trajectory of the eight core infrastructure sectors, which saw their advance slowing to 5.2% in March, down from 7.1% in February. These sectors are critical, as they account for 40.27% of the IIP. Current projections from economic experts suggest that this could lead to a moderation in industrial output growth, with some estimates indicating a potential deceleration to between 3.5% and 5%.
According to the data released by the Ministry of Mines on a recent Friday, the index of mineral production in March stood at 156.1, only a marginal 1.2% higher than its level in March of the previous year. However, it wasn’t all grim news, as certain non-fuel minerals reported positive growth, including copper concentrate, gold, manganese ore, diamond, graphite, limestone, and magnesite.
When viewing the mining output growth over the fiscal year 2023-24, the sector achieved a respectable 7.5% increase as compared to the 5.8% in the year 2022-23. Particular minerals such as iron ore, limestone, and aluminium hit record levels of production during the year, with rises of 7.4%, 10.7%, and 2.1%, respectively, as stated by the ministry.
The healthy uptick in output of critical minerals like iron ore and limestone is illustrative of the strong demand in user industries, namely steel and cement. The significant expansion in aluminium production further underscores potent economic activity in interconnected sectors including energy, infrastructure, construction, automotive, and machinery. These sectors are intrinsic to the nation’s development, as they generate employment, facilitate trade, and contribute to GDP growth.
The Indian mining sector’s global standing is impressive, with the country being recognized as the second-largest producer of aluminium, the third-largest of limestone, and the fourth-largest of iron ore. This not only highlights India’s resource wealth but also its strategic importance in the global commodities market.
India’s mining sector faces a multitude of challenges, such as regulatory hurdles, environmental concerns, and the pressure to adopt sustainable practices. Despite these challenges, the sector’s substantial contribution to the Indian economy cannot be overstated, as it continues to play a critical role in fulfilling the raw material demands for a multitude of industries.
In conclusion, while the dip in mining output growth in March poses concerns for the short-term outlook of industrial production, the overall performance of the mining sector in the fiscal year demonstrates resilience and potential. Industry stakeholders and policymakers alike will be anticipating the upcoming IIP data to gauge the direction of the broader industrial landscape, with the hope that the slump in March is a temporary setback rather than a prolonged trend.
